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Collective Investment Schemes

The success being enjoyed by Malta as an international financial services centre is founded on a set of policies that have been strongly influenced by EU membership, the development of a single European market in financial services and the adoption of the Euro. Within this context, Malta’s financial services industry has become a major pillar of Malta’s economy, and is increasingly becoming an important contributor to economic growth.

Collective Investment Schemes in Malta are regulated under the Investment Services Act, Chapter 370 of the Laws of Malta (the “Act”). The Act offers a very robust regulatory framework since it is largely modelled on EU investment funds legislation; nevertheless, since the Maltese framework is principle-based rather than rules-based, it offers a very attractive regime not only for licensees but also for investors.

Collective Investment Schemes wishing to issue or create an units or carry on any activity in or from within Malta must possess a valid Collective Investment Scheme licence issued by the Malta Financial Services Authority (the “MFSA”), unless such Collective Investment Scheme is already authorised in that respect by a national competent authority in another EU Member State and has applied to ‘passport’ their licence in Malta.

Collective Investment Schemes in Malta

Collective Investment Schemes are defined in the Act as schemes or arrangements which has as their object, or as one of their objects, the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange and which are characterised, inter alia, by risk spreading, the pooling of contributions of the participants, the issuance of units and the redemption or repurchase of those units upon request of the holders.

AIFs targeting Professional Investors and PIFs targeting Qualifying Investors are not required to meet the risk spreading requirement.

Types of Collective Investment Schemes in Malta

The Act, including the Subsidiary Legislation and Regulations issued thereunder, set out the regulatory framework for the various types of Collective Investment Schemes regulated in Malta. In accordance with the Act, Collective Investment Schemes may be set up in Malta as either:

  • UCITS schemes;
  • Professional Investor Funds (“PIFs”);
  • Alternative Investment Funds targeted exclusively to Retail Investors (“Retail AIFs”);
  • Alternative Investment Funds targeted to Professional or Qualifying Investors (“Professional AIFs”); or
  • Notified Alternative Investment Funds (“NAIFs”).


Retail Funds

Retail Funds in Malta can be set up as either UCITS schemes or Alternative Investment Funds targeted exclusively to Retail Investors.

UCITS schemes

UCITS schemes are open-ended type of funds which are subject to the requirements of the UCITS Directive (Directive 2014/91/EU). UCITS schemes may be marketed to the general public in Malta and ‘passported’ to other EEA States, provided that they follow the notification procedure stipulated in the UCITS Directive.

UCITS schemes operating from or marketed in Malta are required to appoint an external manager, which shall be duly authorised as a UCITS management company, unless such schemes are set up as a self-managed scheme. UCITS Managers established in Malta should be in possession of a Category 2 Investment Services licence qualifying as UCITS Managers. In a self-managed scheme, the Board of Directors would appoint an Investment Committee, which shall be composed of at least three members, who shall be responsible for the investment management of that UCITS scheme.

Investment Committee members are expected to be ‘fit and proper’ persons in terms of the applicable Rules and Regulations issued by the MFSA from time to time. The concept of ‘fit and proper’ is a fundamental regulatory concept: this is a rigorous test which requires senior staff and potential and existing licensees – both at licensing stage and on an on-going basis thereafter – to demonstrate solvency, competence and integrity in all their dealings.

UCITS schemes are required to keep under custody the assets of the scheme with a Custodian. Custodians or depositaries of UCITS schemes should also be based in Malta and in possession of a Category 4a for Category 4b Investment Services licence.

UCITS schemes are required to draw up a Prospectus and the Key Investor Information Document (the “KIID”).

Structures of UCITS schemes

UCITS schemes may be set up and structured in one of the below legal forms:

  • An Investment Company with Variable Share Capital (“SICAV”);
  • An Incorporated Cell Company of a SICAV (“SICAV ICC”);
  • An Incorporated Cell of a Recognised Incorporated Cell Company (“RICC”);
  • A Partnership en commandite or limited partnership;
  • A Common Contractual Fund; or
  • A Unit Trust.
Type of Collective Investment Scheme
Minimum Initial Share Capital
Application Fee/ Notification Fee
Annual Supervisory Fee/ Renewal of Notification Fee

Collective Investment Schemes which fall within the scope of Article 4 of the Act; and which are authorized as UCITS Schemes, non-UCITS Retail Schemes and Retail AIFs

€ 300,000

€ 2,500

€ 3,000

 

Retail AIFs

Retail AIFs are open-ended type of funds intended exclusively for Retail Investors, that is, for all types of investors, except those qualifying as Professional Investors in terms of AIFMD and Professional Clients in terms of MiFID.

Retail AIFs do not fall within the scope of the UCITS or the AIFM Directive, and therefore, cannot be ‘passported’ to other EEA States. Nevertheless, Retail AIFs can be marketed in other states by following the private placement rules and restrictions applicable in those relevant states.

Structures of Retail AIFs

UCITS schemes may be set up and structured in one of the below legal forms:

  • An Investment Company with Variable Share Capital (“SICAV”);
  • An Investment Company with Fixed Share Capital (“INVCO”);
  • An Incorporated Cell Company of a SICAV (“SICAV ICC”);
  • An Incorporated Cell of a Recognised Incorporated Cell Company (“RICC”);
  • A Partnership en commandite or limited partnership;
  • A Common Contractual Fund; or
  • A Unit Trust.
Type of Collective Investment Scheme
Minimum Initial Share Capital
Application Fee/ Notification Fee
Annual Supervisory Fee/ Renewal of Notification Fee

Collective Investment Schemes which qualify as a Professional Investor Funds and Alternative Investment Funds in terms of the Investment Services Rules issued for this purpose by the competent authority

€ 300,000

€ 2,000

€ 2,000

 


Professional Funds

Professional Funds in Malta can be set up as either Professional Investor Funds or Alternative Investment Funds targeted to Professional or Qualifying Investors. Particularly, it is essential to note that both PIFs and AIFs are targeted at financially sophisticated investors who habitually invest in alternative assets.

The minimum investment threshold for both types of funds is € 100,000.

PIFs

Professional Investor Funds may be set up as open-ended or closed-ended funds intended exclusively for Professional Investors in terms of the applicable Rules and Regulations issued by the MFSA from time to time.

PIFs operating in Malta are required to appoint an external manager, which shall be duly authorised as a fund management company, unless such schemes are set up as a self-managed scheme. Fund managers established in Malta should be in possession of a Category 2 Investment Services licence and be duly authorised by the MFSA to provide investment management services to Collective Investment Schemes. In a self-managed scheme, the Board of Directors would appoint an Investment Committee, which shall be composed of at least three members, who shall be responsible for the investment management of that AIF.

Investment Committee members are expected to be ‘fit and proper’ persons in terms of the applicable Rules and Regulations issued by the MFSA from time to time. The concept of ‘fit and proper’ is a fundamental regulatory concept: this is a rigorous test which requires senior staff and potential and existing licensees – both at licensing stage and on an on-going basis thereafter – to demonstrate solvency, competence and integrity in all their dealings.

Professional Investor Funds are not required to a Custodian or a Depositaries for the safekeeping of assets.

PIFs set up in Malta are required to publish and register with the MFSA an Offering Memorandum and Offering Supplement intended to provide sufficient information to enable potential investors to make an informed investment decision.

PIFs are regulated under a domestic regime and therefore do not fall within the scope of the UCITS or the AIFM Directive; consequently. PIFs do not benefit from the ‘passport’ benefit as brought about by both the AIFM and UCITS directives respectively. Nevertheless, PIFs can be marketed in other states by following the private placement rules and restrictions applicable in those relevant states.

Structures of PIFs

UCITS schemes may be set up and structured in one of the below legal forms:

  • An Investment Company with Variable Share Capital (“SICAV”);
  • An Investment Company with Fixed Share Capital (“INVCO”);
  • An Incorporated Cell Company of a SICAV (“SICAV ICC”);
  • An Incorporated Cell of a Recognised Incorporated Cell Company (“RICC”);
  • A Partnership en commandite or limited partnership;
  • A Common Contractual Fund; or
  • A Unit Trust.
Type of Collective Investment Scheme
Minimum Initial Share Capital
Application Fee/ Notification Fee
Annual Supervisory Fee/ Renewal of Notification Fee

Collective Investment Schemes which qualify as a Professional Investor Funds and Alternative Investment Funds in terms of the Investment Services Rules issued for this purpose by the competent authority

€ 125,000

€ 2,000

€ 2,000

Scheme sub-funds (per sub-fund)

€ 1,000

Scheme sub-funds (per sub-fund)

€ 600

 

 
 
 
 
 
 
 
Professional AIFs

Professional Alternative Investment Funds are essentially Collective Investment Schemes which are not licensed as UCITS schemes, targeting exclusively Professional Investors in terms of AIFMD and Professional Clients in terms of MiFID, and which can either be open-ended or closed-ended.

AIFs operating from or marketed in Malta are required to appoint an external manager, which shall be duly authorised as an AIFM in accordance with the AIFDM, unless such schemes are set up as a self-managed scheme. AIFMs established in Malta should be in possession of a Category 2 Investment Services licence qualifying as an AIFM. In a self-managed scheme, the Board of Directors would appoint an Investment Committee, which shall be composed of at least three members, who shall be responsible for the investment management of that AIF.

Investment Committee members are expected to be ‘fit and proper’ persons in terms of the applicable Rules and Regulations issued by the MFSA from time to time. The concept of ‘fit and proper’ is a fundamental regulatory concept: this is a rigorous test which requires senior staff and potential and existing licensees – both at licensing stage and on an on-going basis thereafter – to demonstrate solvency, competence and integrity in all their dealings.

Professional AIFs are required to keep under custody the assets of the scheme with a Custodian. Custodians or depositaries of UCITS schemes should also be based in Malta and in possession of a Category 4a for Category 4b Investment Services licence.

AIFs targeting Professional Investors in terms of the AIFMD (Directive 2011/61/EU) may be marketed to the general public in Malta and ‘passported’ to other EEA States, provided that they follow the notification procedure stipulated in the UCITS Directive.

Structures of Professional AIFs

UCITS schemes may be set up and structured in one of the below legal forms:

  • An Investment Company with Variable Share Capital (“SICAV”);
  • An Investment Company with Fixed Share Capital (“INVCO”);
  • An Incorporated Cell Company of a SICAV (“SICAV ICC”);
  • An Incorporated Cell of a Recognised Incorporated Cell Company (“RICC”);
  • A Partnership en commandite or limited partnership;
  • A Common Contractual Fund; or
  • A Unit Trust.
Type of Collective Investment Scheme
Minimum Initial Share Capital
Application Fee/ Notification Fee
Annual Supervisory Fee/ Renewal of Notification Fee

Collective Investment Schemes which qualify as a Professional Investor Funds and Alternative Investment Funds in terms of the Investment Services Rules issued for this purpose by the competent authority

€ 300,000

€ 2,000

€ 2,000

 

Notified AIFs

Back in 2016 Malta launched what is known as the Notified AIF regime; a regime which is intended for promoters to market their fund in the Maltese market within 10 working days from notification to the MFSA. This regime is only applicable to AIFs targeting Qualifying or Professional Investors.

AIFs falling within the scope of the notified regime should be managed by an AIF Manager (“AIFM”), which shall be duly authorised and regulated under the AIFM Directive (Directive 2011/61/EU).

Structures of Notified AIFs

UCITS schemes may be set up and structured in one of the below legal forms:

  • An Investment Company with Variable Share Capital (“SICAV”);
  • An Investment Company with Fixed Share Capital (“INVCO”);
  • An Incorporated Cell Company of a SICAV (“SICAV ICC”);
  • An Incorporated Cell of a Recognised Incorporated Cell Company (“RICC”); or
  • A Common Contractual Fund;
Type of Collective Investment Scheme
Minimum Initial Share Capital
Application Fee/ Notification Fee
Annual Supervisory Fee/ Renewal of Notification Fee

Notification by the AIFM on behalf of the Notified AIF

/

€ 2,000

€ 2,000

Notified AIF sub-fund (per sub-fund)

€ 1,000

Notified AIF sub-fund (per sub-fund)

€ 600

 

How can novolegal assist?

novolegal has experience in advising clients with the structuring and licensing of retail and professional collective investment schemes, from the pre-incorporation stage throughout the authorisation process and post-authorisation stage. We have also assisted clients with all legal and regulatory compliance related matters, including company incorporation, drafting of offering documents and necessary policies and procedures and representations on behalf of clients with the MFSA.

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